Type Definition
Time-based wage rate Time-based wage rate is
a payment method
where employees are
compensated based on
the number of hours they
work. It involves setting a
fixed payment per hour,
and the total wage is
determined by
multiplying this rate by
the total hours worked,
usually paid weekly.
Piece rate Piece rate is a payment
method where
employees are
compensated based on
the quantity of output
they produce. Workers
receive a fixed payment
for each unit they
produce, and their wages
depend on their
productivity.
Salary Salary is a fixed, regular
payment made to
employees, typically on a
monthly or yearly basis.
It is commonly used for
professional, supervisory,
and managerial staff and
is not tied to the number
of hours worked or units
produced.
Commission Commission is a financial
incentive where
employees receive a
percentage of the sales
they generate. It can be
in addition to a base
salary or serve as the
primary source of
income, commonly used
for salespeople.
Bonus payment Bonus payment is an
additional payment made
What situation Example
Time-based wage rate is Factory workers who are
suitable in situations paid an hourly rate for
where the output of non- their labor
managerial jobs is not
easily measurable, and
the focus is on
maintaining consistent
quality rather than
quantity.
Piece rate is suitable Fruit pickers who are
when the output of each paid per basket of fruit
worker is easily harvested.
identifiable and
measurable, and there's
a need to minimize unit
costs.
Salary is suitable when Accountants, doctors, or
status and income office managers who
security are important receive a fixed monthly
motivators, and where salary.
output is not easily
measurable. It's often
used for managerial or
non-manual jobs.
Commission is suitable Real estate agents
for roles where earning a commission on
increasing sales is a property sales.
primary goal, but it may
reduce income security
and potentially lead to
aggressive selling tactics.
Bonus payments are An annual bonus for
often used to reward meeting or exceeding
 to employees on top of
their regular wage or
salary, typically based on
criteria like increased
output, productivity, or
sales.
Performance-related pay Performance-related pay
(PRP) is a bonus paid in
addition to the basic
salary, often used for
workers whose output is
not easily quantifiable. It
involves setting targets,
conducting annual
appraisals, and awarding
bonuses for surpassing
these targets
Profit sharing Profit sharing involves
distributing a portion of a
company's profits among
its employees as an
incentive to align their
interests with the
business's success.
Share-ownership Share-ownership
schemes schemes provide
employees with shares or
the opportunity to
purchase discounted
shares in the company
they work for, aiming to
enhance employee
involvement and
commitment to the
organization's success.
outstanding performance sales targets
or encourage employees
to achieve specific
targets.
PRP is suitable when Bonuses awarded to
managers want to managers based on
encourage goal setting meeting specific
and achievement, performance targets.
especially in roles where
output or sales
performance cannot be
directly measured.
Profit sharing is used to Employees receiving a
enhance employee share of company profits
commitment to the based on a
company's profitability, predetermined formula.
especially when cost-
cutting and revenue-
increasing ideas are
encouraged.
Share-ownership Employees receiving
schemes are used to company shares or
reduce the division options to purchase
between owners and shares at a discount.
workers, increase
commitment, and
encourage employee
participation in decision-
making.
Fringe benefits Fringe benefits, also Fringe benefits are used Offering employees free
known as perks of the to provide status to health insurance or
job, are non-cash higher-level employees company cars.
rewards provided by and to recruit and retain
employers, such as top talent, in addition to
company cars, insurance, regular payment systems.
pension schemes, and
discounts on company
products, aimed at
attracting and retaining
employees.